Businesses tightening air travel budgets

If the experience of corporate travel providers is an indicator, Australian airlines should brace for a cooling in the recent growth rate of business travel as companies not linked to the resources boom rein in expenses.

Corporate travel agents including American Express and BCD Travel point to a flattening in forward bookings and a more cautious tone from clients in general, and in particular within the financial services industry, which accounts for a large share of business travel.

Charles Petrucelli, president of American Express Global Travel, said corporate travel trends were a bellwether for the wider economy, with booking patterns typically moving several months before a corresponding shift in the economy. After strong year-on-year growth in June and July, American Express recorded slowing volumes in August.

“We’re starting to see a levelling off at the moment. The next six to eight weeks will tell if it’s going to last," Mr Petrucelli said.

“Large corporations make pre-emptive decisions and you already have signs of that. [They] are saying, if the economy slows down in the next six months we should reduce travel now."

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Uncertainty over the global economy, fuelled by the debt crisis in Europe, is common feedback from clients across the financial services, information technology and pharmaceutical industries, according to American Express and BCD Travel.

Business class and fully priced corporate economy travel have proven more resilient than leisure travel in Australia, with both
Qantas
and
­Virgin
Australia reporting a strong rise in revenue from the sector in 2011. While business class fares have risen over the past five years, economy fares have failed to return to pre­financial crisis levels.

Qantas spokeswoman Olivia Wirth said the company was yet to see any change, with bookings from corporate accounts still growing, spurred by demand in Western Australia and Queensland.

“Forward bookings for the corporate sector across the Qantas network remain strong, with growth up on last year," Ms Wirth said.

While Mr Petrucelli said the recent slowdown was far removed from the sudden drop-off of late 2008, inquiries from clients on cutting costs and improving financial returns from travel was happening much more regularly in the past few months.

Of the country’s two largest airlines, Virgin Australia had the most to gain from corporations taking the axe to travel budgets because of its lower ticket prices and focus on lifting its service levels and product offering, Mr Petrucelli said.

A National Australia Bank spokesperson said there had been a greater focus on cost efficiency and accountability since Cameron Clyne became chief executive, which included travel but was not limited to it.

Westpac said it continued to review travel spending and “will encourage staff to use Skype, blogs, email and other electronic means" as an alternative to travel.

Telstra
has cut its business travel by half since fiscal 2008, according to its most recent corporate social responsibility report.

That year the company flew 124 million kilometres of business travel, which dropped to 62 million kilometres in 2009-10 through use of video-conferencing and stringent controls, a spokesperson said.

Louise Wheeler, general manager of BCD Travel, said for many companies the focus was not on a wholesale reduction in travel budgets but on getting more from their existing spend.

“Clients are wanting more value than they’re getting from their travel," Ms Wheeler said.

“We’ve probably got to a point where it’s flattened a little, but it’s not consistent. In mining, there is ­definitely no softening, but in other areas, it has flattened."